As we know, King Bali held a Yagna to become the King of Lords. But by taking Vamana Avatar, Lord Vishnu asked him for three steps worth of land. By his original divine avatar, Lord Vishnu covered entire earth and whole galaxy in his three steps. King Bali then became a man without any wealth. King Bali was a noble man. He was a grandchild of Vishnu's great devotee Prahalad.
So why did Lord Vishnu stop him from becoming Indra, the King of Lords?
Yes, Bali Maharaj was a noble man and also have favors of Brahmanas and noble persons. But Aditi, the mother of Demi-gods, had completed the Payo-Vrata to please Lord Vishnu. So, Lord Vishnu had given her the boon to protect her sons. This is described in Śrīmad-Bhāgavatam, Canto 8, Chapter 17.
SB 8.17.16
prāyo ’dhunā te ’sura-yūtha-nāthā
apāraṇīyā iti devi me matiḥ
yat te ’nukūleśvara-vipra-guptā
na vikramas tatra sukhaṁ dadāti
O mother of the demigods, in My opinion almost all the chiefs of the demons are now unconquerable, for they are being protected by brāhmaṇas, whom the Supreme Lord always favors. Thus the use of power against them now will not at all be a source of happiness.
SB 8.17.17
athāpy upāyo mama devi cintyaḥ
santoṣitasya vrata-caryayā te
mamārcanaṁ nārhati gantum anyathā
śraddhānurūpaṁ phala-hetukatvāt
Yet because I have been satisfied by the activities of your vow, O goddess Aditi, I must find some means to favor you, for worship of Me never goes in vain but certainly gives the desired result according to what one deserves.
SB 8.17.18
tvayārcitaś cāham apatya-guptaye
payo-vratenānuguṇaṁ samīḍitaḥ
svāṁśena putratvam upetya te sutān
goptāsmi mārīca-tapasy adhiṣṭhitaḥ
You have prayed to Me and properly worshiped Me by performing the great payo-vrata ceremony for the sake of protecting your sons. Because of Kaśyapa Muni’s austerities, I shall agree to become your son and thus protect your other sons.
First of all, King Bali Performed Vishwajith Yaga to rule all the worlds, But by then Indra was already assigned that position as ruler of gods for this manvantara by bramha. That decision was taken during the start of manvantara and this should be respected. Bali after knowing this wanted to rule/ obtain position which was not his, which is Adharma.. For this lord vishnu had to stop him and give Indra his Position back. Yes King Bali was Bhagavathotama, so is the reason lord vishnu dint kill him rather gor his wealth. Lord vishnu till then asked bali to rule suvar loka which was considered better/greater than heaven (ruled by indra) and vishnu promised to protect him as his guard. Lord vishnu also promised him to make give him position of Indra in Savarni Manvantara.
